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If the price of capital that your business is using increases (more expensive) and wages of workers stay the same would your
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Answer #1

A)

If price of capital increases and wage remains unchanged. Relative price (wage/price of capital) of labor will decrease. So, firm will substitute more labor with capital to maximize profit.

Business will hire more of labor.

(In this case, I assume that labor and capital are substitutes)

B)

If technological innovation makes it easier to substitute labor for capital, demand for labor will become more sensitive towards wages.

So, we can say that demand for labor will become relatively more elastic. (wage elasticity of demand will increase in absolute terms)

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